Everything you need to know about the Objectives of Business. Read this article to learn about the:-
1. Economic Objectives 2. Social Objectives 3. Human Objective 4. National Objective 5. Global Objectives a. Profit b. Growth c. Service to Society d. Market Leadership of Business.
Every business enterprise aims to achieve certain objectives within a specific time period and with resources at its disposal. Objectives are the end point towards which the business directs all its activities.
Business objectives prescribe the code for various activities and determine the direction and efforts needed to accomplish these objectives. The objectives should be practical and quantifiable.
The purpose and objectives with which a business concern is established and run depend upon many factors. They depend largely on the socio-economic-political set-up of the country within which the organisation exists. In this article, we will be exploring all the possible objectives of business.
Everything you need to know about the Objectives of Business
Objectives of Business – Economic and Social Objectives of Business
The purpose and objectives with which a business concern is established and run depend upon many factors. They depend largely on the socio-economic-political set-up of the country within which the organisation exists.
For Example – In capitalist countries like U.S.A. profit maximisation is the main objective of business organisation because of their belief in profit as the mainspring of economic activity in a free enterprise economy. But in the socialist countries the objective cannot be profit maximisation. In U.S.S.R., the main objective of a business unit is maximum output rather than profit.
This is because the entire production and distribution system is controlled by the state which is committed to the welfare of the people. The business units cannot increase their profits by increasing the prices. Their aim is to produce a stipulated quantity of goods of requisite quality from a given set of resources. Efficient use of the resources for the maximisation of material goods and services in the chief objective.
In mixed economies, where both public and private sectors co-exist, profit is not allowed to be the chief objective.
In India, which follows mixed economy, it is widely recognised by the business managers that emphasis on only the maximisation of profit will misdirect the business concerns to a point where their survival may be in dangers.
Therefore, every business enterprise has to keep social objectives in view. If a business enterprise does not fulfill its social obligations, it will be forced to do so by the Government sooner or later.
Thus, every business organisation is required to set its objectives keeping in view the socio-economic-political structure of the society in which it operates. It is very difficult to outline precisely the single objective of a business. Therefore, it is better to have multiple objectives.
We may classify the objectives of a business as:
1. Economic objectives; and
2. Social objectives.
These objectives have been discussed below in detail:
1. Economic Objectives:
Normally, it is said in this wide world that business activity is carried on only for profit. But a good businessman cannot afford to keep profit as his main and sole objective. According to Mr. Urwick, “Earning of profit cannot be the objective of a business any more than eating is the objective of living.” A business unit is an economic in which various factors of production are used. Capital is one of the factors of production and the reward for investing capital is given in the form of profit.
Therefore, a business should not be run to maximise the reward of one factor of production only though it is true that existence of profit is necessary to induce the people to invest money in business ventures. A company which not earning any profit will not be able to attract investors as nobody is willing to assume unnecessary risks. Therefore, “profitability to some extent is necessary condition for the survival of an enterprise. Profit is not an objective but it is a requirement that has to be objectively determined in respect to the individual business, its strategy, its needs and its risks.”
Profit as Basis and Measuring Rod of Economic and Social Functions:
Profit has been considered as the basis of three important economic and social functions.
They are as follows:
(i) It Measures the Effectiveness of the Efforts of an Enterprise:
The measuring rod of an effectiveness of an enterprise is the existence of reasonable profit. It is the profit which shows the efficiency of the business enterprise and the society appreciates the services the services rendered by it. Profit has been considered as the important test of success of the business. It is a symptom of good business health in normal times.
(ii) Profit has Been Considered as ‘Risk Premium’:
Profit is the ‘risk premium’ covering the costs of uncertainty. Considering from this point of view, there is no such thing as profit, but there are only cost of staying in the business. Profit provides an opportunity to the businessman to stay in the business.
(iii) Profit Ensures the Supply of Future Capital for Innovation:
Profit is always required for the expansion of business. It is a sort of inducement to work hard. Therefore, profit is needed for the survival and growth of the enterprise.
According to Peter Drucker the three functions written above are the minimum concept needed for the survival of an enterprise. Thus, the profitability objective measures not the maximum profit the business can produce, but the minimum it must produce.
Further Peter Drucker has said that “The problem of any business is not the maximisation of profit but the achievement of sufficient profit to cover the risks of economic activity and thus to avoid loss.
It is absolutely necessary for the business to earn atleast the amount of profit that will cover its future risks and keep its capital intact. It is this concept which should influence the behaviour of businessmen. Moreover, business enterprises have also to earn profits to provide funds for their growth in the future.”
Profitability and Its Measurement:
A very difficult and these question which often arises is as to how to measure profitability, what should be its basis and form? Should it be in the form of percentage over sales or should it be a measure of percentage of capital invested (i.e. Return on Investment). Although it is very difficult to define precisely the invested capital because of frequent price level changes. Sometimes, these changes are too large even during a short period of one year.
Return on investment is suitable only in case of free enterprise economies where there is free competition and forces of demand and supply are freely allowed to govern prices. But such state of affairs does not exist in practice. Particularly, in a country like India, where certain essential services are managed by the Government, this yardstick cannot work. We cannot measure the effectiveness and efficiency of the Indian Railways on the basis of return on investment.
Other measures of performance like contribution to national product, social benefits and productivity assume greater importance than profit. Even in a private sector, a monopoly drug manufacture may not be allowed as high return on investment as he likes because the society will interface by fixing the quantum of reasonable profits through the Government. Therefore, it is always preferable to use a number of yardsticks or standards simultaneously to evaluate the performance of a business enterprise.
2. Social Objectives:
It is very difficult to define the term “social objectives’. This word may be taken as social responsibility or obligation of a business enterprise and its managers. The term ‘Social responsibility’ refers to both socio-economic and socio-human obligations of the business. A careful study of the concept of social responsibility reveals that it has two different approach –
Firstly, businessmen recognise that since they are managing an economic unit in the society, they have a broad obligation to the society with regard to matters affecting the public welfare such as employment, availability of goods, and inflation.
Secondly, social responsibility indicates a businessman’s obligation to nurture and develop human values such as motivation, moral, co-operation and self-realisation in work.
It has been widely agreed that businessmen today have considerable social power. What they think and do influences their society. This type of influence is social power. This power is virtually granted to them by the society which must have a general relationship with social responsibility.
The social responsibility of business managers need to be commensurate with their social power If they do not assume social responsibility, their social power may be taken by the society through Government controls and regulations. Therefore, every business manager should try to strike a balance between the social power and the social responsibility.
‘Social responsibilities of business’ is not a new concept. Leading and important businessmen of the world have accepted and reaffirmed their belief in this concept. It affects their decisions and their actions.
Modern businessmen are more concerned with it than their predecessors. They recognise that since they are managing an economic unit in the society, so they have an obligation towards the society with regard to their decisions and actions affecting social welfare.
Businessmen are human beings. They have their emotions and value judgements which are influenced by social environment. Like a machine they respond only to economic and technical data. Businessmen, in making decisions, typically apply three separate value systems, along with overriding ethical moral considerations.
(a) Technical – Based upon physical factors and scientific logical.
(b) Economic – Based upon market values determined by consumers.
(c) Human – Based upon socio-psychological needs other than economic consumption needs.
Human value System exerts some weight upon the decisions of the businessmen. For example, when a businessman decides to the prices of his products, he is normally taking an economic decision. But while taking such a decision he is guided by certain factors like effect on inflation and poor section of the society, which proves that his decision is being influenced by human value system.
Social Responsibility and Business:
Since long time there is great controversy between authors of management whether the business should assume social responsibilities or ignore them. It is better and worthwhile to analyse the arguments offered both in favour of and against the assumption of social responsibilities by the business.
Arguments for Assuming Social Obligations:
The important arguments which are offered in favour of business assuming social responsibilities are as follows:
(1) Business is a creation of the society; therefore, it should respond to the demands of the society – Since business uses the resources which belong to the society, it is necessary that every business enterprise should fulfil its social obligations. Business managers are obligated to use the social resources for the common good of society.
(2) The self-interests of the business are best served when business assumes social responsibilities – There is a growing realisation in business managers that it is in their self-interest to fulfill the demands and aspirations of the society. Businessmen who have good environment, education and opportunity make better employees, customers and neighbors for the business than those who are poor, ignorant or oppressed.
(3) Public image of business can be improved – The business will retain the needed credibility with the public if it performs its social obligations. It will try to avoid conflict with the society in its own interest. Good relations with the workers, consumers and suppliers will lead to success of business.
(4) It is the moral and right thing to do – It has been widely agreed and accepted that businessmen today have considerable social power. This power has been granted to them by the society which must have a general relationship with social responsibilities. The social responsibilities of business managers must be proportionate to their social power. If the business managers do not assume social responsibilities, the social power will be taken away by their society through Government controls and regulations and other measures.
(5) The consumers are fully aware and well informed – They expect higher quantity products at reasonable rates. If they don’t get fair treatment form business, they will organise themselves and will compel the business to assume its social responsibilities.
Arguments against Assuming Social Obligations:
The classical writers’ views have been against the business assuming social responsibilities. They have argued that business is an economic institution and as such its primary responsibility is to produce goods and services efficiently and to earn profits for its owners.
Milton Freidman and others have advanced arguments opposing the idea of business assuming social responsibilities are as follows:
(1) Conflicting Consideration – The first very important point is that a business manager will be guided by two considerations, namely, private market mechanism and social responsibilities, which are opposite to each other.
(2) Arbitrary Power – Business managers will get more arbitrary power with matter of allocation or resources in the welfare of the society. They should have no right to interfere with the external environment of business.
(3) Disrespect and Disregard of Market Mechanism – The doctrine of social responsibilities implies acceptance of socialist view that political mechanism rather than market mechanism is the appropriate way to allocate scarce resources to alternative uses.
(4) Government’s Responsibility – Business should have no relationship with welfare schemes. It is the main and sole responsibility of the Government of the land to adopt schemes measures for the upliftment of the weaker sections of the society.
All the arguments have practically no weight in practice because modern business concerns cannot be contented merely with enough profits for their growth and stability in the economic set-up.
The business houses are a part and partial of the society, therefore they must respond to the social needs and values. ‘Social responsibilities’ have assumed greater importance with the investment by the government in the business undertakings in the Public Sector.
The changing needs and values of the society must be reflected in the alternatives considered and priorities assigned by the managers. The managers must take care of the demands, feelings and attitudes of the people, particularly of the persons working in the organisation.
Howard Brown’s View on “Social Responsibilities and Businessmen“:
Howard Brown has given his view on “Social Responsibilities and Businessmen” under three heads:
(1) Businessmen have been forced to consider their social responsibilities because of the fear of public interference.
(2) Businessmen have been persuaded to consider their social responsibilities.
(3) Conditions favourable to the recognition of social responsibilities.
(1) Forced to Consider their Social Responsibilities:
In India businessmen have been forced to consider their social responsibilities because of over-increasing fear of public interference through the Act of the Government. For Example – In India many acts like Factories Act, Industrial Disputes Act, Companies Act and Industrial Development and Regulation Act have been enacted to control the functioning of the business enterprises and they empower the Government to intervene in the affairs of any business whenever situations arises.
Further, the government has been empowered by the constitution to take over the ownership and management of any business undertakings in public interest. Businessmen will not be allowed to maximise their profits by marketing adulterated and substandard goods, creating artificial shortages, exploiting the consumers and the workers and cheating the Government. The fear of punishment for such practices has forced them to come to social norms to which the whole society is committed.
(2) Businessmen have Been Persuaded to Consider their Social Responsibilities and Obligations:
Persuasion has proved to be very effective in many cases. This has avoided direct action by the Government. Government has also tried to persuade the businessmen on various occasions by giving them valuable advice.
Enlightened businessmen have always appealed to the business community to act with constraint. Various associations of businessmen have also worked a lot to persuade their members to perform their social obligations and responsibilities voluntarily.
(3) Conditions Favourable to the Recognition of Social Responsibilities:
It has been in large business houses that managerial function has been given to the professional salaried managers. The new managers are well educated and well acquainted with the expectations of the society. They think in terms of the large- range welfare and interests of the enterprise which can be achieved if they are able to satisfy the customers, society, owners, workers and the Government.
As they are professionals, their motivation and point of view tend to differ in important respects from those of owner-managers. They give ^he required weightage to social and human values in their decisions as they realise that the business undertaking is the creature of the society and it cannot afford to maximise profit at the cost of social welfare.
Profit Objective and Social Obligations:
Profit objective cannot be eliminated as the very survival of the business will be put in danger. Further, the profits should not be maximised by keeping the wages at the low level. The measuring rod of a flourishing business unit is the maximisation of profit.
A business enterprise which is earning profit can serve the society in a better way than an enterprise which is running into losses. If a business unit is earning sufficient profits, it will be prima facie an evidence of the fact that it is being run efficiently. A part of the profit can be retained every year and re-invested in productive channels. This will help in the growth of the enterprise.
Further, an enterprise is also under an obligation not exploit the customers. It should provide high quality goods and services at the lowest possible price and should decrease the cost of production by minimising wastes and delays and by efficiently using the resources. In business everybody will agree on this point that profit is necessary and it is the responsibility of the management to reconcile the interests of owners, workers, customers and society.
Objectives of Business – Top 4 Types of Business Objectives: Economic , Social, Human and National
Every business enterprise aims to achieve certain objectives within a specific time period and with resources at its disposal. Objectives are the end point towards which the business directs all its activities. Business objectives prescribe the code for various activities and determine the direction and efforts needed to accomplish these objectives. The objectives should be practical and quantifiable.
The business objectives can be categorised as:
3. Human and
Objective # 1. Economic:
Since, business is an economic activity; its main objectives have economic attributes.
The various economic objectives of business are discussed below:
i. Profit Earning:
Profits are the sole motivator for an entrepreneur to start business. They are a source of survival, growth and expansion for the business enterprise. Just as food is needed for survival of human beings, profits are required for the existence of business. Profits enable a business to keep up in the market by securing the wealth producing ability of its assets. Profits help in expansion, modernization, diversification and globalization of a business in future. Profits serve as an index of the success, stability and productivity of an enterprise.
ii. Optimum Utilisation of Resources:
The resources such as labour, machinery and raw materials used by the business belong to the nation. It is obligatory for the company to judicially allocate and utilize the resources of the nation for rapid and steady growth of the economy efficiently, economically and effectively. Goods produced by the enterprise should serve the interests of the nation and its citizens.
A business can best use the scarce resources in three ways:
(i) By hiring capable and skilled staff,
(ii) By full use of the installed capacity and
(iii) By minimizing wastage of resources such as natural gas, fuel, electricity etc.
iii. Creating Customers:
Customers are at the core of all business activities. According to celebrated management consultant and author, Peter F. Drucker, “There is only one valid definition of business purpose- to create a customer and give them value for the money they spend”.
A business cannot exist without customers, nor can it expand without capturing a big market share so that maximum people are available to buy its products and services. Customers can be created by effective advertising, marketing and sales initiatives. They can be satisfied and retained by providing reasonable priced and superior quality goods and services and by creating utilities.
In today’s dynamic business environment, business can survive and flourish only if it uses innovative methods for its betterment such as introducing new products, improving the existing products and services, exploring different markets and installing new machinery. It is in the benefit of business to make proper use of scope for innovation created by modern science and technology.
Business enterprises pool in time, money and labour in Research and Development (R&D) to develop innovations such as new technology, better designs, business tools and processes to cut down and cater to the increasing demands of the consumers. Innovation also consists of improving the functioning of management, production, methods of accounting and personnel etc.
Innovation helps the business gain competitive edge over its competitors by offering products and services of greater value at lower prices. In addition, it also enables the business to acquire goodwill in the market.
v. Survival and Growth:
It is the objective of every businessperson to survive in the market in the long-run. This is possible only if the business earns enough profits to cover its expenses, overhead costs, loans etc. A business should also put in efforts to exploit its potential for further growth. Business growth is an indicator of how it is able to explore the opportunities for its expansion. Growth is measured in terms of sales volume, the number of employees, market share of the company, number of products and goodwill in the market.
Objective # 2. Social:
A business is both, an economic institution as well as a social institution. It depends on the society for its growth and existence. Therefore, the business must sincerely aim to fulfill its duties towards the society by earning profits using fair means.
Following are the social objectives of a business entity:
i. Supplying Desired Goods at Reasonable Prices:
The customer, these days, is aware and vigilant about the quality of products available in the market. Thus, the business should ensure that only good quality and reasonably priced products are supplied in the market on a regular basis. The business should refrain, at all costs, from supplying inferior quality goods and services to the customers.
ii. Fair Remuneration to Employees:
Employees deserve fair wages and salary for the services they render to the business organisation. Besides provision of fair remuneration, the employer should also distribute a substantial sum of the profits among the employees in the form of annual bonus and incentives. This practice motivates the workforce and it improves their productivity and commitment towards the organisation.
Also, a business enterprise is duty-bound to provide a healthy working environment to the employees. A congenial atmosphere at work place enhances employee productivity, which in turn, results in faster accomplishment of business goals. Since, employees devote long hours at work; it is the moral obligation of the business to provide sufficient facilities, hygiene and healthy living conditions at the work place.
iii. Employment Generation:
In India, unemployment is a serious national issue and the government is incapable of providing employment to the rising number of skilled labour. In the presence of unemployment, the socio-economic growth of the business is affected significantly. Therefore, a business should render notable service to the society by providing employment opportunities to all irrespective of caste, gender, creed or religion. Furthermore, the business should strive to create employment for specially- abled persons.
iv. Fair Return to Investor:
A business must ensure the shareholders and creditors are paid fair and timely return in the form of dividends and interest. The business should also see to it that the investors are kept informed about the financial health of the enterprise and they receive due appreciation for their investments.
v. Social Welfare:
Business enterprises should serve the society by way of myriad philanthropic activities. They can help build charitable hospitals, dispensaries, schools, libraries, sports clubs, and rest houses for the poor on highways or places of religious significance. A business striving to achieve its social objectives should also support cultural festivals, afforestation and anti-pollution drives etc. They may also help genuine NGOs in the rehabilitation work by way of regular financial assistance.
vi. Payment of Government Dues:
All business establishments should pay government taxes (income tax, GST (Goods & Service Tax), excise duty, customs duty etc.) timely and fairly. The government needs such direct and indirect taxes from business enterprises to spend on public welfare and infrastructure development such as roads, highways, hospitals etc. Businesspersons should also follow the laws of the nation.
Objective # 3. Human:
Labour is an important asset of a business enterprise. Therefore, it is important to ensure that the employees are taken care of. The human objectives of business are meant for looking after the well-being and needs of the employees of a business organisation. A satisfied workforce can help the business in many ways. In fact, human objectives play a key role in accomplishing economic and social objectives.
The human objectives of business are given as under:
i. Labour Welfare:
Business organisations must follow the policy of providing a healthy and safe working environment to all the employees. Proper provisions should be made for the welfare of women, elderly and employees with special abilities, if any. Implementing a fair policy of remuneration and promotion is also a helpful practice to promote labour welfare.
ii. Developing Human Resources:
Human resources are one of the most-prized assets of the organisation. It is imperative for the business to invest in their development. Employee development not only boosts business growth but also the economic growth of the nation. Therefore, business enterprises must encourage human resource development by organising skill-building workshops, training and by sponsoring other innovative initiatives.
iii. Participative Management:
Encouraging the employees to participate in decision-making process of the business builds-up employee accountability, faith and loyalty towards the organisation. It also provides useful information to the organisation for its better functioning. Employee participating in decision-making will lead to the establishment of industrial peace.
iv. Labour Management Cooperation:
The business owners and managers should make special efforts to establish and maintain healthy employer-employee equation. This will secure peace and success in the organisation. Treating the employees respectfully and keeping them aware about the latest developments in the organisation by using proper channels of communication is also a good practice, to ensure labour management cooperation.
Objective # 4. National:
The Objectives of a business towards the growth and development of the country, which help in nation building and self-reliance, are termed as national objective. The national objectives of business are meant for removing regional and national disparity, and optimum utilization of natural resources, maintaining ecological balances and contributing towards making the country self-dependent.
Some of the main National objectives are explained below:
i. National Self-Reliance:
A business must be devoted to serve the nation by helping the government increase the exports and decrease the imports of goods and services. This will fast-track the development of the nation and helps to achieve economic independence. It can be done by developing new technology and applying it in the industry.
ii. Development of Small-Scale Industries:
Large business houses should take up the responsibility of building up small-scale industries which are essential in generation of employment. Small-scale firms can be established as ancillaries to provide raw material to big industrial giants.
iii. Development of Backward Areas:
Business persons must focus on the development of areas that are untouched by industrialisation to raise the standard of living for the people living there. Contributing in the removal of economic disparity in backward areas is a great service a business can render to the nation. To facilitate this cause, government offers special incentives and support to the business enterprises that aim to establish factories in the backward regions of the nation.
iv. Pollution Control:
Advancement in industries and expansion of business activities has polluted air, water and land like never before. Thus, business is a key factor behind the deterioration of quality of life in modern times. To tackle this issue, it is the duty of every business organisation to take appropriate measures such as safe disposal of industrial waste, controlled effluent discharge and smoke emission etc.
Objectives of Business – Top 5 Objectives of Business
There are five survival or basic purposes of a business enterprise and management is called upon to fulfil these primary purposes or goals.
(1) Provision of Goods and Services to Satisfy Consumer Demand:
The specific purpose of a business organisation is to supply economic goods and services. This is the only reason why business exists.
(2) Provision of Employment and Income to People:
In the same process of creation of utilities, i.e., goods and services, business organisation is expected to provide employment to people and through it purchasing power or income to the employees. Modern business has two moral obligations, viz., and maintenance of full employment and fostering of best human relations in industry.
Management should have a firm and sincere belief in the significance of human values in industry because it is said that “where morale is high, output is high” and “ease of work—mental physical alone gives speed of work”. Industrial psychology emphasized the significance of individual differences and human factor in industry.
(3) Provision of Employee Satisfaction:
Any business is a joint enterprise of labour and capital. Foundations of sound personnel management are good pay, steady work, opportunity of training, scope for advancement, participation in management and in profit, and adequate social security measures.
Management should offer meaningful, interesting, challenging and enriched jobs to employees. Management can develop voluntary co-operation of labour through proper motivation the key of management in action. Personnel Manager is a general practioner of industrial psychology.
The earning of reasonable profit reward of enterprise and risk bearing once the capital is invested in plant, machinery, materials, etc.
Management can justify its existence and its authority by the economic results it produces. It must maintain and improve the wealth producing capacity of economic resources entrusted to it. In the absence of reward for enterprise, capital and risk-bearing may be scarce, and economic growth retarded.
Ultimate test of management is business performance, i.e., profitability, and profit is the criterion of efficiency. Achievement (not knowledge) is both proof and aim of business performance. Management by objectives or results assumes unique importance in the task of achieving basic goals of the business. Enterprise is productive when it has a stable and growing earning power.
Justification of Profit:
Profitability is the basic economic objective or need of survival of an enterprise.
(a) Profit is necessary to pay fair return on investment— interest on loan capital and dividend on owned capital.
(b) Profit is necessary to retain some earnings—company savings—for re-investment in-the business to ensure its normal rate of growth.
(c) Profit is the index of efficiency even in a Command Economy and it can ensure steady supply of future capital from outside sources for further expansion and development and thereby provide increasing employment opportunities. Even public sector enterprise must show profits.
(d) Management has a social responsibility to make a profit. A strong economic base is essential to meet the growing social costs to ensure quality of life and social welfare. Problems of urban decay, pollution, transportation, poverty and unemployment demand direct capital expenditure.
Unless the business can maintain and increase the assets, social problems cannot be solved. Hence, profits must be made by business. Then only it can shoulder the burden of social responsibilities.
Of course, profit should be clearly distinguished from profiteering, i.e., the sickness of an “Acquisitive Society”, to get- rich-quick. Profiteering is an anti-social activity. It leads to consumer exploitation and even in a free market economy, individual business resorting to profiteering may be restricted, penalised or put out of market by economic competition, social pressure, political action or legislative interference. There may be even a ceiling on prices and profits, e.g., in a public utility concern.
(5) Social Objectives:
A business enterprise is obliged to fulfil the following social objectives:
(a) Maintenance of quality of the product service,
(b) Fixation of reasonable and fair prices to consumers,
(c) Offer of complete satisfaction to the customers through customer-oriented marketing approach, instead of product-oriented marketing approach,
(d) Contribution to the well-being and uplift of the community or society at large, e.g., preventive measure for air, water and food pollution in the locality, donations to community development and welfare plans, industrial housing, payment’ of taxes to local and central governments, etc.
Social obligations or objectives can enable the enterprise to build up and retain a bright public image of the enterprise and goodwill in the market.
Objectives of Business – Global Objectives of Business:- Profit, Growth, Service to Society and Market Leadership
The objectives of business may be discussed as follows:
Profit is the primary objective of any business enterprise. Profit is the excess of income over expense. It is the reward of the entrepreneur. It is the return on the fourth agent of production, viz., enterprise. Every enterprise wants to stay in business and interested in making profits.
In profit making enterprises, profit should not be an end in itself. There is no denying that profitability is the basic economic objective for the growth of an enterprise. In business, the profit-making enterprise must perform two functions-
i. To cover the losses incurred by unsuccessful enterprises and,
ii. To bear the social burden, i.e., cost of social services.
But this concept is not free from drawbacks.
Growth is another primary objective of business. Business should grow and prosper in all directions over a given period of time.
Growth can be achieved in business with the help of the following strategies:
i. Increasing market share.
ii. Adding more products in the mix.
iii. Expanding market.
iv. Cutting down on costs and increasing productivity.
v. Promoting integration—forward or backward.
3. Service to Society:
Today a business is considered not only as an economic institution but also as a living organ of the society. Service to society along with profit should be the main objective of a profit-making enterprise.
4. Market Leadership:
Earning market leadership in an economy is another objective of business. To earn a niche in the market, innovation is an important factor. Innovation may be in advertising, finance, product etc. For example, in India, Blow Plast earned leadership by introducing soft luggage bags.
Objectives of Business – Economic, Social and Human Objectives
The following objectives of the business can be understood:
1. Economic Objectives:
The people believe that the main purpose of the business is to earn profit. Profit is the excess of income over expenses. Although profit is the main incentive, motivator, objective indication of growth and development and necessary for survival but people differs on the quantity of the profit and intensions behind generating it.
Barnad Shaw writes that “Capitalism has no conscience, its ambition is ‘profit’ and its ‘God’ is ‘Gold’.” But the main essence lies in the economic motive of the business because business confronts with the trade cycles. Hence, to generate profit up to a certain extent is must. Peter Drucker says that the problem of any business is not in the maximization of profit but the achievement of sufficient profit to cover the risks to economic activity and thus to avoid loss.
However, it is an absolute necessity for the business enterprises to produce at least the profit required to cover its own future risks, the profit required to stay in business world and to maintain intact the wealth producing capacity of the resources. It means that a business should at least earn the profit up to a certain extent so that it survives in the time of recession otherwise the market forces will wipe it out of the market. It is necessary for both survival and expansion.
Because if a business is unable to grow with the passage of time, it leads itself to a disastrous situation. So, under the economic objectives there should be a perfect blend between maximization of profit and growth so that it can add more products in the market, diversify into new areas, increase market share and also can cut down costs and increase productivity.
2. Social Objectives:
Business and society are the parts of each other, no one can live in isolation. Without society, the imagination of a business is like making castles in the air because society has provided natural, human and financial resources, etc., to the business. Therefore, the optimum utilization of society should be primary consideration of the business.
Appropriate use of resources, community development and favourable response towards the government following the rules and regulations and payment of certain taxes at the right time should be the prime considerations of the business. According to Henry Ford “Service first and profit second” means to serve the society should be the primary objective followed by profit. It should be taken care that consumer should not be deceived in any manner and timely and appropriate services should be provided to him.
Those businessmen who insisted on and persisted in quality survived competition stayed ahead of others in the market. Persistent quality earns brand loyally to the product which is a vital ingredient of success like HLL, BPL, Philips, LG and Godrej products. To earn a special niche for oneself in the market, innovation is the key factor in the field of product, advertising and distribution, etc.
But all these things cannot be achieved without people who are your employees. Caring for employee satisfaction and taking into consideration their development should be one of social objectives of the business. The businesses which consider the importance of both economic and social objectives are bound to succeed in the market.
3. Human Objectives:
In any business, it is not only the entrepreneur who works but there are three human factors involved in it. One of them is enterprise, other one is employee and the third is customer. Besides entrepreneur, there are thousands of employees who work for the organization and similarly, without customers there is no existence of business. Therefore, to be successful, the satisfaction of all the three is must.
Security of investment, and fair return on the investment, good working condition, job security and handsome salary with growth prospects for employees and smooth supply of products and services with reasonable rates are the functions which must be complied with for the success of business. If all sections are satisfied, that business is above board and has succeeded in fulfilling the human objectives of the business.